JobKeeper turnover test clarification: New law companion ruling

The ATO says it is still finding that some aspects of the JobKeeper turnover tests continue to require further explanation. It has therefore issued a law companion ruling, LCR 2020/1, to aid practitioners and their clients in determining the decline in turnover that is a required criteria for eligibility for the JobKeeper payment.

The test calls for a calculation of “current GST turnover” and “projected GST turnover”, which are terms defined in Division 188 of A New Tax System (Goods and Services Tax) Act 1999 (GST act), subject to modifications to those definitions by the payments and benefits rules. These modifications are, for example, changing “current GST turnover” and “projected GST turnover” to the relevant period being tested rather than for 12 months.

To help with the task of calculating declines in turnover, LCR 2020/1 covers four relevant steps:

  1. what supplies are relevant when calculating projected GST turnover and current GST turnover
  2. how you allocate supplies to relevant periods
  3. how you determine the value of each supply that has been allocated to a relevant period, and
  4. the ATO compliance approach, which effectively allows you to work out the second and third steps at the same time

In issuing the law companion ruling, the ATO notes that the application of the law may be difficult on a practical level for certain entities depending on circumstances, and that these circumstances will most likely vary considerably between entities. It accordingly, via LCR 2020/1, sets out practical compliance approaches that can be applied by an entity to calculate its turnover.

Note that the ruling does not directly address the alternative tests for decline in turnover, however the ATO states that the principles in the ruling will assist practitioners in applying the alternative tests.

Comments may be made below, however Tax & Super Australia is not in a position to answer specific enquiries. Replies may be made by Tax & Super Australia, making general observations about the issue raised. People should ensure that their comments are respectful and professional and should not make adverse comments on specific individuals. Members can of course make use of our Helpline service and receive detailed and technically accurate responses in the timeframe mentioned under terms and conditions.

Website Comments

  1. Vincent Heufel
    Reply

    I still do not know how to enrol an entity that needs to pass the “alternative test”

    • Peter Caldwell
      Reply

      I think you just nominate the ‘current gst period’ you have chosen.

      eg – April 2020 – compared with an alternate period as calculated according to the alternate rules.
      Keep your workings to substantiate your decision.

    • Neville Birthisie
      Reply

      There is some uncertainty about how to complete the JK registration on the portal when using an alternative decline in turn over test. Regardless of the turnover test being used and therefore the period in which the “current GST turnover” is determined, this still needs to be compared against one of the nine available turnover test periods in 2020, and it is the 2020 turnover test period that the portal requires you to nominate.

  2. Neville Birthisie
    Reply

    There is some uncertainty about how to complete the JK registration on the portal when using an alternative decline in turn over test. Regardless of the turnover test being used and therefore the period in which the “current GST turnover” is determined, this still needs to be compared against one of the nine available turnover test periods in 2020, and it is the 2020 turnover test period that the portal requires you to nominate.

  3. Josh
    Reply

    If you’re a sole trader that wasn’t trading this time last year, and you aren’t charging gst yet – is there a way to pass the alternative test, considering it calls you to add up your gst from several alternative months?

    • Steve Burnham
      Reply

      How do entities that are not registered for GST calculate their decline in turnover?
      The government has chosen to use two concepts in the GST law to determine decline in turnover. Whether a entity is registered for GST or not has no bearing on the meaning of these terms. These terms are “current GST turnover” and “projected GST turnover”. “Current GST turnover” and “projected GST turnover” are defined in sections 188-15 and 188-20 of the GST Act respectively (amended by the Rules such that the definitions only apply to the “test period”). Entities should use these definitions to determine their decline in turnover, regardless of whether they are registered for GST or not.

  4. N Italiano
    Reply

    In a recent article published by Mortgage Professionals https://www.mpamagazine.com.au/sections/features/how-mortgage-brokers-could-be-able-to-access-jobkeeper-payments-271440.aspx eludes to trail commissions being excluded from the GST Turnover test. The article goes on to say…
    “This requires you to disregard trail commission received for services provided in earlier months.
    Effectively, you are comparing the value of new activity during the test period in 2020 as compared to new activity during the comparison period in 2019.”

    Article suggests that they should be ignored for Jobkeeper eligibility purposes in current period and therefore if broker has not obtained new business in the current period will most likely achieve an in excess of 30% decline in turnover.

    Wondering what your thoughts are on this. Trail commissions for many brokers continues over several years for many loans. We include these as income in the relevant period it is recieved.

    • Steve Burnham
      Reply

      Neville Birthisel replies: With trailing income, as it’s passive income, the first quest is whether the entity is carrying on a business. Members need to walk through the normal tests to answer this.

      If Yes, then the normal JK tests apply. Remembering for the decline in turnover test there are (at least) three tests, supply v accruals v cash. Although the ATO prefers taxpayers to stay with the basis they normally use on their BAS, that is not what the JK Rules say. So an entity with trailing income which normally prepares their BAS on a cash basis, could look to a supply basis, given that the underlying supply from which the trailing income arose may be in an earlier accounting period. So the income may have been received in March or April, meaning decline is not satisfied. But if supply from which the income is generated was in say December or January and there were no/minimal supplies in March or April, the test may be satisfied.

      *** important to note that following the strict JK Rules may still attract the attention of the ATO, especially where the BAS is normally on a cash basis

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